Reshetar Sys., Inc. v. Thompson

Contractor contracted to build a restaurant in Minnesota, promising to pay each subcontractor, upon receipt of payment from the owner, the amount to which the subcontractor was entitled. Appellant became the subcontractor for carpentry and drywall work. Upon completing its work, Appellant was not paid the full amount owed. After Contractor settled a dispute with the restaurant, it offered Appellant a smaller sum, claiming it was Appellant's pro rata share of the settlement proceeds. Appellant rejected the offer and sued Contractor and its Owner in state court. Owner and his wife subsequently filed a petition for Chapter 7 bankruptcy relief, with the debt to Appellant unsatisfied. Appellant commenced this adversary proceeding to have the debt declared nondischargeable. The bankruptcy appellate panel (BAP) determined that neither 11 U.S.C. 523(a)(4) nor 11 U.S.C. 523(a)(6) barred discharge of the debt. The Eighth Circuit Court of Appeals affirmed, holding (1) Owner was not a section 523(a)(4) fiduciary by reason of a Minnesota statute or Owner's Minnesota common law duties, nor did Contractor's use of its own property amount to embezzlement; and (2) the BAP did not err in finding no malicious injury, which resolved the section 523(a)(6) issue. View "Reshetar Sys., Inc. v. Thompson" on Justia Law